The International Energy Agency released its key annual report, World Energy Outlook, today and in it, makes a number of striking forecasts about the profile of energy.
And forecast is the right word – the IEA takes the pulse of energy markets as they stand today and projects them out to about 2035. These are not Nostradamus-like predictions of the future. The forecasts vary in detail from year to year, but are useful to policymakers and to those interested in energy-related issues.
This year, the IEA report has stirred some controversy.
In an indication how “fracking” is reshaping the global energy picture, the International Energy Agency today projected that the United States will overtake Saudi Arabia as the world’s largest oil producer by 2017.
And within just three years, the United States will unseat Russia as the largest producer of natural gas.
The response to this assertion has been mixed. Rob Wile at Business Insider polled his sources and found a decided lack of support:
But Manuj Nikhanj, the lead oil play analyst at research firm ITG, emailed us to there is no way that output alone would be able to meet U.S. demand, which already stands at 19 million barrels per day:
Do they mean energy independence on a million BTU basis including natural gas? The US consumes 19 million barrels of oil per day, so not sure how you become independent with less than 10 million barrels per day of production (based on the media chart they put out).
Nikhanj speculates that Canadian oil may fill the gap, but the IEA does not make that clear.
Another analysts dismisses this idea:
David McColl, who covers oil and gas stocks for Morningstar, emailed us to say Canada wouldn't be able to fill the gap either:
Consider Canada - on its own it isn’t likely to meet those needs, and they may be exporting more significant volumes overseas by 2020 as well. This means some U.S. refineries will still be relying on oil imports, which will likely be priced to international markets.
Bold in original. Even if the IEA has been exceptionally optimistic in its assessment, the U.S. is becoming more energy independent. That part isn’t in dispute. And remember – these forecasts are not meant to be predictive.
And nuclear energy? Glad you asked:
“Our projections for growth in installed nuclear capacity are lower than in last year’s Outlook and, while nuclear output still grows in absolute terms (driven by expanded generation in China, Korea, India and Russia), its share in the global electricity mix falls slightly over time,” a trend likely to drive up the fossil fuel import bills and make it harder to meet emissions reduction targets aimed at slowing climate change.
This is especially true of Japan and Germany. Nuclear energy will still play a role in Japan but not Germany, which wants to move to renewable energy sources. Until it can do that, it will depend on its plentiful coal supply. As the report points out, this does carbon emission reduction goals no good.
A little more about the atom (really, the same thing put a little differently):
Although some OECD countries, particularly Germany and Japan, are cutting back on nuclear power in the wake of the 2011 accident at Japan’s Fukushima Daiichi nuclear plant, nuclear power is still expected to account for 12 percent of global electricity generation by 2035, thanks to increased use of nuclear power in China, Korea and Russia.
This is based on what IEA sees happening today – that 12 percent can grow (and hopefully not shrink) in subsequent forecasts – there are enough countries with nascent industries to suggest future growth.
The IEA is starkly negative about the world’s response to climate change:
“Taking all new developments and policies into account, the world is still failing to put the global energy system onto a more sustainable path. Global energy demand grows by more than one-third over the period to 2035 in the New Policies Scenario (our central scenario), with China, India and the Middle East accounting for 60% of the increase,” the report said.
Scenarios are projections based on different assumptions. The New Policies Scenario, for example, flows from policies in place today. Other scenarios make different assumptions, notably different energy mixes - for example, greater use of nuclear energy with all other assumptions left the same. These can be interesting in that they can show better or worse outcomes that policymakers can pursue (or avoid). The base scenario is fairly direct – if nuclear energy capacity doesn’t grow, carbon emission goals become harder to reach.
You can visit the IEA yourself to get an idea of the organization’s work, but not to read the report – unless you want to pony up the 120 euro for the pdf. I’m basing this first look on published stories, but I expect to see the outlook itself soon – I know I’m interested in looking at the different scenarios and will post on them here.